Cancer testimonials

NYT story on claims by cancer centers: According to the FTC, it won't apply its endorsement rules to ads for cancer centers, further increasing the gap between what a medical institution can say and what a drug or device manufacturer can say--sometimes about the same equipment/treatments. I find it hard to imagine that the general substantiation requirement doesn't apply to hospital ads, though the story says it doesn't.

How (some) copyright owners think

Exclusive Rights has an intriguing post, puzzlingly titled On actively encouraging fan infringement and commercial success (Put a Ring on It). It argues persuasively that in some circumstances copyright owners not only tolerate certain types of remix but actively encourage it. The puzzling thing--okay, the oxymoronic thing--is the label "infringement" for that. When a copyright owner induces copying or the creation of derivative works, I had always thought we called that "licensing." The license may well be implicit, but it's still a license. (Compare the RIAA's rhetoric about putting one's CD collection on one's mp3 player--they say that it "won't usually raise concerns" though there's no right to do so; they want to have the right to object, which is to say they want to be able to pull the license.) When we're at the point of calling authorized uses infringing because that increases copyright owners' perceived freedom of movement, we are really down the rabbit hole.

(I have also, of course, set aside the fair use issues and the question whether the copyright owner could actually assert rights to stop all the uses the post mentions.)

A different take on the attention economy

I've written about attribution and credit before; Terri Senft has a very interesting essay excerpt up about how those concepts play out for teens, especially teen girls.

Consumer protection hypo of the day

Consumer buys HDTV from online retailer, has unsatisfactory experience, returns HDTV and posts unfavorable review online. Retailer contacts consumer, offers compensatory hard drive (retail value $100-150), asks consumer to change bad review to five-star review.

Questions: (1) Assuming the consumer changes the review and doesn't disclose that he received a hard drive for doing so, have the consumer and the retailer violated the FTCs endorsement guidelines? (2) What should the retailer have said to the consumer about changing the review, following best practices? (3) Assume that the consumer promised to change the review in return for the hard drive, but then decides that the service was so bad that he wants to leave the review in place. What does contract law have to say about this agreement, given the public policy reflected in the Guidelines?

CFP: Law & Humanities Junior Scholars

Georgetown University Law Center, Columbia Law School, University of Southern California Center for Law, History & Culture, and UCLA School of Law invite submissions for the eighth meeting of the Law & Humanities Junior Scholar Workshop to be held at Columbia Law School in New York City on June 4 & 5, 2010.

PAPER COMPETITION:

The paper competition is open to untenured professors, advanced graduate students and post-doctoral scholars in law and the humanities; in addition to drawing from numerous humanistic fields, and welcomes critical, qualitative work in the social sciences. Between five and ten papers will be chosen, based on anonymous evaluation by an interdisciplinary selection committee, for presentation at the June Workshop. At the Workshop, two senior scholars will comment on each paper. Commentators and other Workshop participants will be asked to focus specifically on the strengths and weaknesses of the selected scholarly projects, with respect to subject and methodology. Moreover, the selected papers will then serve as the basis for a larger conversation among all the participants about the evolving standards by which we judge excellence and creativity in interdisciplinary scholarship, as well as about the nature of interdisciplinarity itself.

Papers should be works-in-progress between 10,000 and 15,000 words in length (including footnotes/endnotes), and must include an abstract of no more than 200 words. A dissertation chapter may be submitted but we strongly suggest that it be edited so that it stands alone as a piece of work with its own integrity. A paper that has been submitted for publication is eligible so long as it will not be in galley proofs or in print at the time of the Workshop. The selected papers will appear in a special issue of the Legal Scholarship Network; there is no other publication commitment. The Workshop will pay the travel expenses of authors whose papers are selected for presentation.

Submissions (in either Word or Wordperfect, no pdf files) will be accepted until January 8, 2010, and should be sent by e-mail to:

Center for the Study of Law and Culture
culture@law.columbia.edu
Columbia Law School
435 W. 116th Street
New York, N.Y. 10027

Please be sure to include your contact information. For more information: Tanisha Madrid, 212.854.0692 or culture@law.columbia.edu. The full text of the Call for Papers is available at: http://www.law.columbia.edu/center_program/law_culture/lh_workshop.

Nominative use of Hogwarts?

Op-ed in the NYT: the author recounts numerous instances of colleges (or college tour guides, at least) comparing themselves to Hogwarts. Use in commerce? Fair use?

Product displacement

Tom the Dancing Bug comic on undesirable product placements and the avoidance thereof. Now that we have cybersquatting, will we get placementsquatting?

If you build it, they will gripe

Cleary Building Corp. v. Dame, 2009 WL 4506414 (D. Colo.)

Cleary sued Dame over a website Dame operates attacking Cleary’s performance in building a building for Dame, and some related nasty comments. Dame succeeded in getting the trademark-related claims kicked out on the pleadings—a rare but encouraging result, even though the court accepted the bare allegation that the Cleary marks are famous, a result I’m not sure survives an Iqbal challenge.

Anyway, the allegations: Dame contracted with Cleary for the construction of a 50' x 100' x 18' 8" post frame building. Construction began in December 2008, then halted for the holidays. In January 2009, the relationship soured, and Dame refused to allow Cleary access to the construction site until Cleary agreed to address his concerns. Despite various negotiations, Dame refused to allow Cleary to do a final walk-through and correct remaining problems.

By May 2009, Dame was advertising his building for sale online, with links to myclearybuilding.com. The site used Cleary’s blueprint plans, including at least one Cleary mark, as a background to the opening page. (Actually, it’s a pretty cute graphic design, in my opinion.) He also posted a link to the website on a bulletin board where others were discussing the quality of Cleary products. “Readers accessed photographs of the Dame Building and commented that, while some defects were merely cosmetic, Cleary Building’s installers appeared to have done a ‘poor job’ overall and that the roof attachment was ‘horrible.’ After viewing the pictures on the Dame Website, one reader suggested that Dame ‘get a lawyer,’ while another opined that ‘Unless you live in the desert and never get rain or snow the roof will give you fits until you finally replace it.’”

Cleary further alleged false or misleading statements about Cleary and the Dame Building appeared on the website, for example that Cleary “declared the project finished.”

Dame didn’t move to dismiss the defamation, trade disparagement, and breach of contract claims, so the court didn’t analyze them.

Cybersquatting: The court found that “myclearybuilding.com” was confusingly similar to the Cleary word mark. But ACPA requires a bad faith intent to profit. Cleary argued that the following allegations were sufficient: Dame posted false and misleading statements about Cleary; the website apparently misrepresented the number of times it had been accessed; Dame used the domain name to attempt to gain an unfair advantage in negotiations; and Dame offered to remove the site if Cleary met Dame’s demands.

Even drawing all reasonable inferences in Cleary’s favor, the court found that Dame was making a noncommercial/fair use of Cleary’s marks. The exhibits to the complaint demonstrated that the site was nothing more than a gripe site: Dame was telling his story. “This is a valid exercise of free speech rights, and not the type of harm that the ACPA was designed to protect.” Moreover, ACPA directs courts to consider the registrant’s intent to divert consumers by creating a likelihood of confusion; here confusion is not plausible. There’s no disclaimer, but it’s clear from the screen shot that the site is about Dame’s experiences with Cleary. Confusion over source, sponsorship, or affiliation would simply be unreasonable.

What about Dame’s use of the site as bargaining power? ACPA also directs courts to consider a registrant’s offer to transfer the domain name for financial gain, when the registrant hasn’t used the domain name for the bona fide offering of goods or services. But use of a domain name as a bargaining chip isn’t an offer to sell, and anyway here Dame offered to remove the site, not sell it. In the end, the ACPA factors are “given to courts as a guide, not as a substitute for careful thinking about whether the conduct at issue is motivated by a bad faith intent to profit.” The paradigmatic harm of cybersquatting on hundreds of domain names in order to sell them to mark owners wasn’t alleged. The ACPA claim was dismissed.

The trademark claims also failed, because Cleary didn’t state a plausible claim that Dame used Cleary’s mark “in connection with any goods or services.” Instead, the mark was used in connection with his opinion about Cleary’s goods and services. Even accepting that Dame advertised his building with ads that included links to the site, and that the site uses Cleary’s marks and contains false/misleading statements about Cleary, that’s insufficient. The use of the trademark was separated from any goods or services offered for sale; the site doesn’t even link to the online ads. This was “too roundabout and attenuated” a connection. Trademark rights shouldn’t be used to quash discussion about trademark owners.

The dilution claim also requires commercial use, and Cleary’s pleading was equally insufficient on that count.

The court then dismissed the §43(a)(1)(A) claim for the same failure to allege commercial use, and then §43(a)(1)(B) for the same reason, which I will pickily point out should have been a failure to allege competition/commercial advertising and promotion.

The court found that it had diversity jurisdiction because, based on Dame’s own representations, the site had been accessed a substantial number of times and damages for defamation were potentially very large. But the state common law trademark infringement and statutory unfair and deceptive trade practices had to be dismissed anyway, the latter because Colorado law requires that to be liable a defendant must act in the course of its business, which means “regular commercial activity.” Dame was selling “ONE used post frame building” (allcaps in original! A judicial first?) and thus does not fall within the scope of the law.

State claims not preempted but Lanham Act claims precluded in gas case

VP Racing Fuels, Inc. v. General Petroleum Corp., 2009 WL 4282124 (E.D. Cal.)

Plaintiff, a seller of street-legal 100 octane racing fuel, sued for federal and state false advertising claims based on alleged misrepresentations of the octane rating of defendant’s racing fuel. Defendant distributes racing fuel under the Sunoco brand; plaintiff argued that it sold 97 octane fuel as 100 octane. Plaintiff alleged that it collected samples of defendant’s product from ten fueling stations in California, and lab tests showed that none were 100 octane; they tested at 97 octane or below. Defendant argued that the claims were preempted by the Petroleum Marketing Practices Act and that plaintiff failed to plead fraud with particularity.

Preemption: Defendant argued that the PMPA doesn’t have a private right of action, and that the FTC has exclusive authority to enforce its provisions. States have traditionally regulated petroleum products, though, creating a presumption against preemption. The PMPA regulates the testing and disclosure of octane ratings, in accordance with FTC guidelines. Each entity in the distribution chain must certify the octane rating to the next recipient, based either on its own determination or certification from its distributor. Each retailer must display the octane rating clearly and conspicuously. Initially, the PMPA had a broad express preemption clause preempting state laws unless they were “the same as” the PMPA. In 1992, Congress amended the law to allow states to provide for any remedy or penalty with respect to any law permitted by the preemption clause. The intent was to allow the states more authority to enforce the law, given that an investigation found that 9% of a nationwide sample in 1988 was mislabeled by at least half an octane point, which is considered a significant violation. And the feds had failed to test or enforce octane compliance since 1981. Result: so long as state law is not different from or in addition to PMPA requirements, it can be used to enforce the PMPA and is not preempted.

So the question was whether plaintiff’s state law claims were “the same as” PMPA’s requirements. The UCL prohibits unlawful, unfair, or fraudulent acts or practices along with false or misleading advertising. The “unlawful” provision borrows violations of other laws, turning a violation of the underlying law into a per se violation of the UCL. Though the PMPA has no private right of action, plaintiff isn’t trying to bring a PMPA action, but a UCL claim. The 1992 amendment allows states to do this sort of thing.

Defendant argued that the UCL isn’t “the same as” the PMPA. But the UCL doesn’t attempt to set stricter standards, only to enforce the federal standard. Because it adopts the underlying law for purposes of the action, the UCL is “the same as” the PMPA here. There’s also no implied preemption or field preemption.

What about the false advertising claim under California’s FAL? Defendant argued that a ban on false advertising isn’t the same as the PMPA. But plaintiff is complaining about intentional misrepresentation of octane level, which is unlawful only if the advertiser knows or should know of the falsity or misleadingness. Defendant argued that under the PMPA a distributor need not know the actual octane level and may rely on the refiner’s certified octane level. Here, though, plaintiff is alleging that defendant engaged in misleading or false advertising, not certification or display of the octane rating.

The PMP doesn’t regulate the act of advertising petroleum products, so there is no preemption. The legislative history states: “This rule of construction is not, however, intended to authorize intentionally deceptive or misleading identification of automotive gasoline. Such would be the case if the trademark to be utilized were ‘100 Octane’ and this trademark were to be utilized to identify automotive gasoline with an octane rating of less than 100 under the statutory definition.”

What about preclusion (not preemption, though often called that) of the Lanham Act claim? When two federal statutes conflict, the more specific prevails. The court found that this result was required here, barring the Lanham Act claim. The specific provisions of the PMPA allow the distributor to rely on a supplier’s certification. Because knowing falsity isn’t a prerequisite to a §43(a) violation, a defendant could be complying with the PMPA and still falsely advertising under the Lanham Act. Thus, the Lanham Act claim was “preempted.” (Compare the results for Lanham Act cases about false patent markings—the courts manage the tension between the regimes by requiring a showing of intentional falsehood, and preserving Lanham Act claims in that subset of cases. I’m not sure why this couldn’t have been done here, especially given the result on the state law claims.)

In federal courts, California consumer protection claims have to be pled with particularity, even though they need not be in state courts. The court found the complaint sufficiently well-pleaded under the “fraudulent” and “unfair” prongs of the UCL, though not the “unlawful” prong because the only legal violation alleged was the Lanham Act. (Apparently the court forgot what it said about the relationship between the UCL and the PMPA at the beginning of the opinion.)

The false advertising claims under the UCL and the FAL failed, however, for want of factual allegations about the key element of “some type of advertising statement” by defendant. These claims were dismissed with leave to amend.

Charbucks case bounced back for third round

Starbucks Corp. v. Wolfe's Borough Coffee, Inc., --- F.3d ----, 2009 WL 4349537 (2nd Cir.)

The Second Circuit generally likes dilution, at least when Judge Leval isn’t around, and in this case it cut back on one of the most powerful limits on dilution: the requirement that an accused mark be substantially similar to the plaintiff’s mark before dilution could be found. Also, and relatedly, this case marks the first significant articulation I can recall of a difference between state and federal dilution claims. Stuck with precedent about the similarity requirement, the court of appeals nonetheless went with a broader balancing test for federal dilution.

As we all know, Starbucks is big and famous. Wolfe’s does business as Black Bear, a small business that sells coffee via mail order, the internet, and a limited number of New England supermarkets. In 1997, Black Bear began selling a dark roasted blend, Charbucks Blend, and later Mister Charbucks. The Charbucks Blend package showed a picture of a black bear above BLACK BEAR MICRO ROASTERY in large font, with the large slogan “You wanted it dark … You’ve got it dark!” Mister Charbucks had Black Bear’s name on it, a picture of a man walking, and the slogan “Roasted to the extreme … for those who like the extreme.”

Starbucks demanded that Black Bear stop using the Charbucks marks, but Black Bear declined. Its principal testified: “[m]y main objection was that basically this was a large corporation coming at me and saying, telling us what to do, and, oh, by the way you're going to pay for it, too.... [S]ome of the requests that they were making were really off the wall.”

At trial, Starbucks introduced the testimony of Dr. Warren Mitofsky, “a scientist in the field of consumer research and polling.” Based on his telephone survey of 600 consumers, he concluded that consumers associated “Charbucks” with “Starbucks,” and that the connections made were negative.

Black Bear won the trial; Starbucks appealed, and by then the TDRA had passed, so the Second Circuit remanded for further proceedings, and also commented that it wasn’t clear that New York dilution law was coextensive with federal dilution as amended. The parties being in agreement that no further evidentiary submissions were required, they briefed the issues and the district court again ruled for Black Bear. Starbucks appealed again.

Federal dilution law includes a six-factor test: (1) degree of similarity between the marks; (2) degree of famous mark’s inherent/acquired distinctiveness; (3) extent of famous mark’s substantially exclusive use; (4) degree of recognition of famous mark; (5) junior user’s intent to create an association with the famous mark; (6) actual association.

First, the court of appeals found no clear error in the district court’s finding that the Charbucks marks were “minimally similar” to the Starbucks marks. As presented to consumers, Charbucks is part of either “Mister Charbucks” or “Charbucks Blend” in packaging with Black Bear’s name “in no subtle manner,” and the packaging also makes clear that Black Bear is a New Hampshire “Micro Roastery.” The images, color, and format differ from those of Starbucks. On the Black Bear website, the dissimilarity between the marks is still evidence because of Black Bear’s domain name, blackbearcoffee.com, and other products such as T-shirts and mugs displaying the Black Bear mark.

It’s unlikely that Charbucks will appear to consumers outside this context, since it appears only on the packaging and the website, unlike the fish-shaped crackers at issue in Nabisco v. PF Brands, which might have been separated from their boxes. It was not clearly erroneous for the district court to find that the Mister prefix and Blend suffix lessened the similarity between the marks. The court of appeals rejected the argument that Charbucks was the only term of note, because Mister and Blend were generic and/or too weak to serve a brand-identifying function.

The district court then concluded that dissimilarity alone was enough to defeat the blurring claim, and anyway weighed strongly against Starbucks. The court of appeals concluded that the first conclusion was error, and the district court may have placed “undue significance” on similarity in determining likely dilution. The existence of some, even “not substantial,” similarity between the marks may be sufficient “in some cases” to show likely dilution by blurring. Substantial similarity is not a requirement for federal dilution. (Well, so much for resolving cases on summary judgment. And that’s too bad, given how sensible the original rule was and how consistent with the articulated rationale for dilution in the legislative history—think of all the classic dilution examples given by Congress, all of which weren’t just substantially similar but identical.)

The Second Circuit’s prior substantial similarity requirement, the court of appeals reasoned, “can likely be attributed to the lack of guidance under the former federal statute and the existence of a ‘substantially similar’ requirement under state dilution statutes, which were better defined.” But the TDRA lists six nonexclusive factors, and it doesn’t use the words “very” or “substantial” in connection with the similarity factor. (There are lots and lots of trademark cases finding that failure on one of the key factors—mark similarity and product relatedness are the classic ones—is alone fatal to a trademark claim, even though the test is multifactor. If one concedes that at a certain point dissimilarity alone would be fatal—imagine similarity that was merely “both marks are English words”—then I don’t see why courts can’t easily conclude that substantial showings have to be made on key factors. The court’s reasoning, though, is good evidence for Bill McGeveran’s claim that courts are increasingly engaging in mechanical rather than common-law methods of interpreting the trademark statute.)

Under the TDRA, one of the factors is the “degree of similarity” between the marks, which “does not lend itself” to a requirement of substantial similarity. If there were a substantial similarity requirement, the significance of the remaining five factors would be “materially diminished” because they’d have no relevance without substantial similarity. (Of course, (2) and (4)—degree of distinctiveness and extent of recognition—are always going to favor the famous mark if it is in fact famous, so their significance is pre-diminished, or I suppose pre-enhanced. The various factors are not all of equal weight, and the statute does nothing to suggest that they are. By adopting a common-law type multifactor test, I would argue, Congress accepted the history of trademark multifactor tests, which do typically weigh certain factors more heavily than others, both formally and, as Barton Beebe has shown, empirically.)

The court of appeals concluded that the district court’s error likely affected its view of the other factors in analyzing the blurring claim. Indeed, the district court erred on evaluating the remaining two disputed factors: (1) intent to create an association and (2) evidence of actual association. The district court determined that Black Bear intended to associate Charbucks with Starbucks, but that Black Bear didn’t act in bad faith. But the intent element of the blurring statute doesn’t require bad faith; intent to create an association alone favors a finding of likely dilution.

As for actual association, 3.1% of 600 consumers surveyed responded that Starbucks was a “possible” source of Charbucks, and 30.5% responded that Starbucks was the first thing that comes to mind when they heard the name Charbucks. The absence of confusion, to which the district court referred, has no probative value in the dilution analysis. Thus, the federal dilution by blurring claim was remanded.

Tarnishment requires reputational harm: linkage to products of shoddy quality, or portrayal in an unwholesome/unsavory context such that it won’t serve as a wholesome identifier of plaintiff’s product. Starbucks argued that Charbucks evoked the image of bitter, over-roasted coffee; 30.5% of those surveyed immediately associated Charbucks with Starbucks, and 62% of them indicated they’d have a negative impression of Charbucks.

The court of appeals was unpersuaded. A mere association between Charbucks and Starbucks, plus a negative impression of Charbucks, is insufficient to establish likely dilution by tarnishment—nothing there shows that the consumer would view the junior mark as harming the reputation of the famous mark. The more relevant question (and one can sense why Starbucks didn’t ask it) is how Mister Charbucks/Charbucks Blend would affect positive impressions of Starbucks coffee. “We will not assume that a purportedly negative-sounding junior mark will likely harm the reputation of the famous mark by mere association when the survey conducted by the party claiming dilution could have easily enlightened us on the matter.” In fact, the court speculated, Charbucks might even strengthen the positive impressions of Starbucks by contrast—it brings to consumers’ attention the fact that Starbucks has no “Char,” and therefore of the two, Starbucks might be more attractive. “Juxtaposition may bring to light more appealing aspects of a name that otherwise would not have been brought to the attention of ordinary observers.”

Starbucks argued that “Charbucks” is already a pejorative term for Starbucks coffee (a risky tactic—in Hormel, the Second Circuit was willing to find SPAM pre-tarnished) and thus causes negative associations. The court of appeals disagreed. Although the term was once used pejoratively during the “coffee wars” in Boston, Black Bear wasn’t propagating that negative meaning, but is redefining it for a positive image for its own line. Consistent with Black Bear’s intent to profit, the coffee is “[v]ery high quality. It's our life. We put everything into it.” This won’t harm Starbucks’ reputation. The fact that Charbucks is marketed as high-quality is inconsistent with the concept of tarnishment. (Would the Second Circuit be willing to make the same finding about high-quality porn?) Product similarity may affect blurring, but it also undercuts tarnishment.

What about parody, as in the Chewy Vuiton case? Black Bear can’t qualify under the statutory parody exception because it’s using Charbucks as a designation of source for its own goods. The Second Circuit held that, even if it were to follow the Chewy Vuiton case and hold that parody can defeat a dilution claim against a source-indicating use, that wouldn’t help Black Bear.

Here, Black Bear’s use is, “at most, a subtle satire” of Starbucks as a reference to Starbucks’ dark roast, but that’s not a clear enough parody to qualify for the Fourth Circuit rule. The owner testified, “[t]he inspiration for the term Charbucks comes directly from Starbucks’ tendency to roast its products more darkly than that of other major roasters.” By using that term for its own high-quality, darkest-roated product, Charbucks is “promoted not as a satire or irreverent commentary of Starbucks but, rather, as a beacon to identify Charbucks as a coffee that competes at the same level and quality as Starbucks in producing dark-roasted coffees.” Therefore, it wouldn’t effect an increase in public identification of the Starbucks mark with Starbucks. (Isn’t this logic in contradiction with the tarnishment analysis above?)

Black Bear sustained its victory on state dilution. State law doesn’t require fame, and its multifactor test (invented, by the way, by the Second Circuit) is different from the TDRA’s multifactor test. Most important here, New York requires “substantial” similarity. (Further on that “by the way”: the Second Circuit’s multifactor test for NY dilution is “(i) the similarity of the marks; (ii) the similarity of the products covered; (iii) the sophistication of the consumers; (iv) the existence of predatory intent; (v) the renown of the senior mark; and (vi) the renown of the junior mark.” New York Stock Exchange, Inc. v. New York, New York Hotel LLC, 293 F.3d 550, 558 (2d Cir. 2002). Is there a relevant word beginning with ‘s’ missing from (i)? Or is it not missing at all, because it doesn’t need to be there to be part of the caselaw?) Given that the district court didn’t clearly err in finding lack of substantial similarity, the state law claim failed.

Likewise, the court of appeals upheld the finding of no liability for infringement/unfair competition. Though the Starbucks marks are strong and the goods are similar, with no gap to bridge, that’s not enough. Bridging the gap is irrelevant and shouldn’t favor Starbucks when the parties compete directly. (I take this to mean that identicality of goods already makes the similarity of goods factor weigh as strongly as it can in the plaintiff’s favor, and to then add in bridging the gap would be double-counting. That there is no gap to bridge hardly seems irrelevant in the abstract. But mostly the fact that we need to angst so much about how to deal with the identical-goods situation suggests that the multifactor test, despite the Second Circuit’s hopes, is always at risk of becoming mechanical and detached from its underlying objective. It’s also confirmation of Mark McKenna’s argument that things went bad in trademark when courts decided that they’d use the multifactor test for everything, even competing-goods cases.)

The court of appeals rejected Black Bear’s argument that the extreme strength of the Starbucks marks should weigh against likely confusion, because the (mechanical) rule is that strength favors the plaintiff. True, a strong mark can weigh against likely confusion where the defendant’s mark is a clear parody and there’s widespread familiarity with the parody, as when the parodist is a Muppet. But Charbucks is at most, familiar only to the New England region and some consumers on the internet. “More importantly, Charbucks is not a ‘clear parody’” because it’s on a directly competing product.

On the rest of the factors, there was no clear error except on the sophistication of consumers. For example, Starbucks’ telephone survey--which found that 3.1% of respondents named Starbucks as a possible source of Charbucks, plus greater levels of association with Starbucks and with coffee--was insufficient because it didn’t present Charbucks in the context in which Black Bear uses it. (Also, 3.1% is a ridiculously low level of confusion, even more so given the tentativeness of the question—a “possible” source?) Also, Starbucks couldn’t produce any evidence of actual confusion, and eleven years of coexistence without confusion is a “powerful indication” of no likely confusion, given that Black Bear has sold about $7000 annually of Charbucks.

Nor was Black Bear’s intentional reference to Starbucks problematic. The only relevant intent is intent to confuse, which is considerably different from an intent to copy. The district court isn’t required to draw an inference of bad faith from deliberate copying where there’s evidence to the contrary. Black Bear has always taken the position that “Char” and the different trade dresses prevented confusion, and indeed as a small, local business, its owner testified that association with a large corporation “would be very bad for us.” Thus, the district court’s conclusion on intent was reasonable.

On quality of goods, Starbucks argued that the high quality of both parties’ products should favor a confusion finding, but when goods or services of equal quality compete, the quality factor “cuts both ways.” (The Second Circuit should just en banc this to get it out of the test. It’s a useless factor in modern trademark law, whatever its utility when tarnishment mattered to a confusion finding; a footnote in this opinion gestures in that direction, pointing out that it’s not clear why inferiority of goods/services has anything to do with likely confusion as we currently understand it.)

Finally, the district court concluded that ordinary consumers were unlikely to mistake Charbucks for Starbucks, whether or not they were “highly discriminating.” Starbucks argued that its customers are not sophisticated and generally make quick, casual purchasing decisions about low-cost goods. The court of appeals agreed that the district court was wrong to weigh this factor against Starbucks—it was basically anticipating its overall weighing of the factors, not making an independent finding about sophistication—but that wasn’t enough to change the outcome. It’s true that case law associates the purchase of low-cost goods in a supermarket with low sophistication. But price alone isn’t determinative of consumer care. Because there wasn’t much evidence before the district court on this factor, the court of appeals declined to give it much, if any, weight.

Given that the district court erred in weighing bridging the gap in Starbucks’ favor, and didn’t screw up too badly on the rest, the court of appeals “a fortiori” affirmed the ultimate conclusion of no likely confusion.

In which I grouse about copyright preemption

People v. Williams (Ill. S. Ct. 2009)

Since I just taught this topic, I figured a new decision in the area was worth blogging about. Illinois, like many other states, makes criminal offenses out of (1) record piracy and (2) failing to label sound recordings with the actual name and address of the manufacturer. (Query: how many legitimate copies are there out there without the manufacturer’s name and address? Rather a lot, I’d think. How many legitimate record companies have been prosecuted for this?) Following the national trend, the court found (1) preempted and (2) okay, which I think is half right.

Illinois has an antipiracy law. Section 16-7 of the Criminal Code says:

“(a) A person commits unlawful use of recorded sounds or images when he:

(1) Intentionally, knowingly or recklessly transfers or causes to be transferred without the consent of the owner, any sounds or images recorded on any sound or audio visual recording with the purpose of selling or causing to be sold, or using or causing to be used for profit the article to which such sounds or recordings of sound are transferred.

(2) Intentionally, knowingly or recklessly sells, offers for sale, advertises for sale, uses or causes to be used for profit any such article described in subsection 16–7(a)(1) without consent of the owner.”

The owner is the owner of the master sound recording, the original physical object on which a given set of sounds were first recorded.

Section 16-8 covers music and movies; it says:

“(a) A person commits unlawful use of unidentified sound or audio visual recordings when he intentionally, knowingly, recklessly or negligently for profit manufactures, sells, distributes, vends, circulates, performs, leases or otherwise deals in and with unidentified sound or audio visual recordings or causes the manufacture, sale, distribution, vending, circulation, performance, lease or other dealing in and with unidentified sound or audio visual recordings.”

An unidentified recording is one without the “actual name and full and correct street address of the manufacturer, and the name of the actual performers or groups prominently and legibly printed on the outside cover or jacket and on the label of such sound or audio visual recording.” (I’m assuming that “for profit” modifies both “manufactures” and “causes the manufacture.” Also, I hope your for-profit movies with incidental clips of performances are all properly labeled. I will return to this.)

The defendant here attempted to sell pirated compact disc recordables (CDRs) at a laundromat in Chicago. Many of the songs were owned by the five major labels, and the CDs didn’t have a label with the true name and address.

There’s no presumption against preemption because Illinois’s law against record piracy came in 1975, after Congress had already decided to bring sound recordings within the scope of copyright law.

The argument here was express preemption. The sound recordings the defendant tried to sell are within the subject matter of copyright. The state argued that Congress only intended to preempt civil laws, not criminal laws, because §301 says only that “no person” is entitled to a state right equivalent to copyright and the state’s antipiracy law is protecting society as a whole and not the copyright or the copyright owner. Um, no; or, more formally, the state’s argument “is at odds with the language of the federal Act, the legislative history of the federal preemption provision and the federal and state case law interpreting the Act.” But other than that, it could have been completely convincing! Among other things, Goldstein v. California dealt with a criminal antipiracy statute the Court deemed to provide “copyright protection” and an “exercise of the power to grant copyrights.” Post-Goldstein, Congress enacted §301, and the legislative history is clear that Congress intended to preempt state law protection for post-1972 sound recordings.

So is there any extra element? The state argued that the consent element was conditioned on ownership of tangible property—the master sound recording—and not ownership of the copyright, and thus distinct from a copyright right. The court disagreed. The essential elements of a violation of the law correspond “almost exactly” to copyright infringement. Among other things, it is an affirmative defense that the sound recordings at issue are in the public domain. The legislature’s purpose was to combat record piracy, not to protect tangible property. Moreover, the Copyright Act protects tangible property too—works that are fixed. Even if the owner of the master recording isn’t the copyright owner, s/he will still need a license from the copyright owner to distribute the sound recording. The gravamen of the law is the protection of copyrightable works.

The state then contended that the “for profit” requirement was an extra element. Unsurprisingly, this claim was rejected. For one thing, some forms of criminal infringement have a commercial advantage/private financial gain element. Thus, this part of the law was preempted.

The court then turned to the true address/failure to label count. The defendant didn’t argue §301 preemption, even though I don’t see what the extra element is—an omission is not an extra element, I would have thought by definition!—though the court’s analysis has implications for preemption.

The defendant argued that the labeling requirements for manufacturers’ names and addresses and performers’ names violated First Amendment rights to anonymity.

First, the court held (wrongly, though relying on cases upholding similar antipiracy laws) that the law doesn’t govern “pure speech” but a combination of commercial conduct and speech. Selling an expressive product may involve a combination of commercial and noncommercial speech, but putting a name and an address on a product is speech. I am not saying this changes the outcome, but it irks me and signals once again how incoherent the speech/conduct distinction is. Because the court found that this was conduct regulation, it was only subject to the O’Brien test. (Which, not for nothing, was designed for expressive nonspeech conduct—when the expressive “conduct” is a name and address/failure to supply a name and address, I don’t even know what it means to call that conduct other than “we plan to uphold this law.”)

Okay: O’Brien allows regulation when the law furthers a substantial governmental interest unrelated to the suppression of free speech and the incidental restriction on First Amendment rights is no greater than necessary. And the law is presumed constitutional; the defendant has to show substantial overbreadth. This law has features that significantly narrow its application, particularly the “for profit” limitation, which means that it wouldn’t cover either free distribution or distribution at a price “geared only to cover the recording’s production and distribution costs.” Though payment doesn’t deprive speech of constitutional protection, this is still a narrowing factor.

The second narrowing factor is the limited nature of the disclosure requirement for performers—it just requires disclosure of their “name,” but artists may disclose “whatever name they want to use,” including pseudonyms, which the Supreme Court deemed sufficient to maintain a speaker’s anonymity. Thus, the only burden is on manufacturers who seek both anonymity and profit.

The state has a substantial interest in “protecting consumers from deceptive recordings within the commercial market,” particularly since the market is vulnerable to counterfeits. OK, some questions: (1) Aren’t consumers interested in the performer, not the manufacturer? (2) Given that the court just allowed use of pseudonyms, couldn’t I release a record as The Beatles and not fall afoul of this law, suggesting that the provision at issue bears little relation to the asserted interest? (3) Given the analysis of the previous provision, how can anyone maintain with a straight face that the point of this provision is consumer protection rather than combating record piracy? (My conclusion is not that the law is unconstitutional. Rather, I think that there’s §301 preemption. When someone is prosecuted for failing to put the name and address of the manufacturer on a copy, that’s an omission and can’t be an “extra element”; the offense here is record piracy, nothing else. If you disagree: could the state avoid §301 preemption with a law that criminalized failure to mark a pirate CD with the label “pirate CD”?)

Anyway, in light of the narrowness of the statute, any overbreadth is insignificant in light of the statute’s legitimate coverage. The court pointed out that every court to consider a First Amendment challenge to a labeling statute has rejected it. The court was particularly impressed with Anderson v. Nidorf, 26 F.3d 100 (9^th Cir. 1994), singling out a couple of (pretty bad) arguments. The Anderson court thought that anonymity claims for perfomers and manufacturers were “peculiar” because “most of their lives are consumed in marketing their identity.” In First Amendment law, just because most people want to say something doesn’t mean the state can make you say it if you don’t want to do so.

Also, the Anderson court reasoned that one of the primary purposes of the statute was to prevent piracy, thus making a chilling effect on speech almost unthinkable. This isn’t so bad from a First Amendment perspective, though it does require you to believe that almost everyone prioritizes money over anonymity and that the state can legitimately prefer the interests of the former over those of the latter, even though Buckley v. Valeo says that the government can’t suppress the speech of some to enhance the relative voice of others. Since I think Buckley is obviously wrong, I do find this a persuasive First Amendment argument—it just walks the law straight into §301 preemption.

And finally, political or antiestablishment recordings can avoid the law simply by not being sold for commercial gain or profit. After all, if you’re political or antiestablishment, you shouldn’t care about filthy lucre! That’s for Sarah Palin or Al Gore or George Carlin, none of whom … oh, wait. Also, what happens to your record or movie if you don’t identify the performers in your fair-use samples/clips on the label? Maybe we can say that the law doesn’t cover Expelled and its use of Lennon’s “Imagine” because it’s directed at the “primary” performers featured in the work, but the fact that we have to work around this problem signals once again that this is a copyright law.

The decision’s upshot: These labeling laws can be applied constitutionally in most instances; the norm will be that the performer or manufacturer desires disclosure. The law isn’t substantially overbroad.

Finally, the defendant argued that narrow tailoring would require limiting the law only to those who distribute recordings without the owner’s consent, or who distribute misrepresented recordings. But a no-consent limitation, though it might adequately serve the antipiracy interest, would also subject the law to a successful preemption challenge. And anyway, a no-consent limitation would defeat the law’s consumer protection interest. “A consumer has no less a defective product because the copyright owner consented to its distribution, nor is the consumer in a better position to remedy the defect. Dealers could escape liability under section 16–8 if they simply omitted any information on the identity of the recording’s manufacturer. Yet consumers–the persons section 16–8 is designed to protect–are no better off. If the recording they have purchased is defective, they are without a reliable name or address to direct their complaints or seek redress.” The defendant argued that his recordings weren’t misrepresented—they contained the performances on the label—but that doesn’t help because they didn’t have the name and address of the manufacturer, so “unless the recording companies disclosed on defendant’s products actually manufactured the specific recordings,” they were still misrepresented. (A fact I’m sure is totally material to consumers!)

Query: if Congress didn’t use the Lanham Act to create “a species of mutant copyright law,” can states achieve the same effect with a mandatory labeling law without running afoul of preemption? Dastar, I think, bolsters my preemption argument. (Though Sears/Compco do allow states to have labeling laws to protect consumers, so I admit there’s a counterargument—but I really don’t get how the manufacturer labeling serves a consumer protection objective, even though the court accepted that claim with a straight face.)

The defendant then argued that section 16-8 violated substantive due process for failure to bear a reasonable relationship to its purpose. It doesn’t require intent to defraud or deceive, and, without a consent requirement, it doesn’t bear a reasonable relationship to piracy. Given the limits of substantive due process protection, these were easy claims to reject. The law covers “an independent artist selling his own music on a street corner, who neglectfully fails to disclose himself as the performer and manufacturer on the packaging of the sound recording” and “a person who sells authorized copies of a sound recording on behalf of an artist, but where the copies omit the mandated disclosures because the artist may have wanted to conceal his identity.” The legislature meant to punish this conduct, and it was free to do so to protect consumers.

More on my William & Mary piece, Economies of Desire

The piece, on creative motivations and their overlap or lack thereof with copyright's incentive theory, is available here, and William & Mary has posted a response by Steven Hetcher here. What with the end-of-semester craziness, I haven't read it yet, but I look forward to doing so.

Formula for false advertising

PBM Products, LLC v. Mead Johnson Nutrition Co. (E.D. Va. Dec. 1, 2009)

According to PBM Products, the maker of store-brand infant formulas has won a $13.5 million jury verdict against Mead Johnson, though I haven't seen a copy of the jury form. My earlier discussion of the court’s denial of a preliminary injunction is here.

The court also ruled on Mead Johnson’s laches defense. PBM didn’t unreasonably delay acting against Mead Johnson; although scattered statements from the challeged ads had appeared in Mead Johnson’s ads for a couple of years before PBM sued, false advertising claims must assess the ad as a whole. “The 2008 Mailer taken as a whole and in context clearly takes a new approach in tone and message towards store brand infant formula. Mead Johnson consciously decided that its marketing should be more aggressive and risky as it witnessed a decrease in its sales and an increase in store brand sales. The 2008 Mailer and its attack on store brands was the result of that marketing decision.”

Mead Johnson has been enjoined from making false statements about PBM, including specifically “It may be tempting to try a less expensive store brand, but only Enfamil LIPIL is clinically proven to improve brain and eye development,” and “There are plenty of other ways to save on baby expenses without cutting back on nutrition.” Mead Johnson was directed to recall any such ads currently in the “public forum.”

The rare explicitly false statement of sponsorship

Most times, trademark owners' allegations that consumers will be confused about sponsorship or affiliation are just ways to expand the scope of infringement by relaxing the theory of what constitutes confusion. But not always. The attention-grubbing Salahis run something called the Land Rover America's Polo Cup, for which one can buy extra-special Cartier seats. Except that many of the listed sponsors for the 2010 event, including Land Rover and Cartier aren't sponsors. (I get the sense from the story that many of them--possibly all--are embarrassed or embittered, or both, former sponsors. Apparently the Salahis' optional relationship to reality extends to paying suppliers and delivering on promises; also to identifying the amount of money they raised for charity and devoting same to charitable endeavors.)

Panel on the FTC's New Endorsement and Testimonial Guides

Sponsored by the American Bar Association Section of Antitrust Law Committees on Private Advertising Litigation, Consumer Protection, Federal Civil Enforcement and Corporate Counseling.

Moderated by Dana Rosenfeld, Kelley Drye

Stacey Ferguson, Division of Advertising Practices, FTC

(Standard disclaimer: these are her own views.) Today’s the effective date of the Revised Guides. Emphasizes that the Guides themselves don’t provide for fines, though practices inconsistent with the Guides can result in FTC investigation and possible resulting fines. Big rule: deceptiveness of endorsement/testimonial depends on the facts.

An endorsement is anything that consumers are likely to believe reflects speaker’s personal views, whether or not identical with the manufacturer’s, whether or not the speaker reads from a script. Fictional dramatizations and statements by company spokespersons are not endorsements because they’re apparent to the audience.

Endorsements must reflect endorser’s general views and must not contain any express/implied representation that would be misleading if made by the advertiser. Advertisers can be liable for misrepresentations and for failure to disclose material connections, as can endorsers.

Principal changes: requirement of disclosure when advertiser paid for study touted in the ad; deletion of “results not typical” safe harbor; addition of examples of disclosing material connections in social media marketing.

Typicality: An advertisement employing an endorsement reflecting the experience of an individual or a group of consumers on a central or key attribute of the product or service will be interpreted as representing that the endorser’s experience is representative of what consumers will generally achieve with the advertised product in actual, albeit variable, conditions of use.

Net impression of typicality controls, regardless of disclaimer—disclaimers don’t generally work. Advertiser must possess and rely on adequate substantiation—consumer endorsements are not themselves substantiation. Must have substantiation of typicality. 20% is not typical.

If the extreme conditions are fully disclosed in the testimonial, you can use them—a woman who testified to extreme weight loss and explained that she worked out six hours a day and ate only the advertiser’s product plus raw vegetables is disclosing the extremity of her circumstances. The Jared/Subway example—apparent that he was an extreme case who made major lifestyle changes. The advertiser must be able to substantiate that people who follow this extreme case could expect similar results. If the endorsement doesn’t disclose the extreme circumstances, it’s deceptive. If the ad just discloses the woman’s weight loss, have to disclose the results consumers could ordinarily expect, and those disclosures need to be substantiated.

Disclosure of connection: when does a consumer become an endorser? When the consumer is sponsored by the advertiser, looked at objectively. Are they acting independently, or are they part of the advertiser’s marketing campaign? Definitely: Explicit understanding; cash payments; additional perks; network marketing programs; network advertising agencies; commissions. It depends: Continuous free merchandise; value of the product or service; links to where the product can be purchased.

Similar concerns with advertorials. Is it editorial or an ad? An ad is a positive statement produced in whole or in part, or otherwise influenced, because of a benefit or expected benefit provided by the advertiser or its agent. Some cases will not be clear.

When in doubt, disclose freebies.

Advertisers should monitor bloggers; other best practices (including frequency of monitoring) remain to be seen. Should guide/train bloggers on appropriate disclosures/claims. Free products should be disclosed because they can be considered compensation on a fact-specific basis. Depends on the value of the product—is it enough to push the consumer towards a positive review? (Cialdini's classic book Influence would say that free alone is enough to change behavior, regardless of value; in fact I recently read a book about that.)

FTC is also concerned with astroturfing. Employee relationship must be disclosed if employee touts on, say, a consumer message board. Advertiser has a responsibility to have policies in place and train employees regarding acceptable practices.

Mark Brian Levine, NAD

Q over elimination of safe harbor: we’ve seen cases with no testing at all, so the advertiser has no idea what the generally expected performance is. Also cases where there are only studies on one ingredient, not studies on the product as sold: how does that work? CelluScience example: study suggested positive results, but not quantifiable and not comparative to other therapies as stated in the ad. NAD found the advertiser couldn’t make percentage or comparative claims via testimonial—result under new FTC guidelines seems likely to be the same.

Another example: Bravina as a social anxiety treatment. Couldn’t make testimonial claims without substantiation, and there was none with respect to public speaking anxiety. Similarly, when weight loss examples were off the scale of the results shown in the advertiser’s study of WeightAway, they couldn’t be used as testimonials even if they were actual results.

Lance Armstrong endorsement for FRS healthy energy supplement: advertiser claimed it was a celebrity endorsement, not a professional Tour de France winner endorsement. NAD found that was unclear; he is a professional cyclist identified as a Tour de France Winner, thus a professional athlete/expert in endurance. What should he do to confirm the supplement’s efficacy? Even if he’s a celebrity, NAD found the ad needed to be changed.

WeKnowDiets: product review website, apparently unbiased, but actually promoting particular products that gave the “editor’s choice” award to the sponsor. This was unacceptable.

Remains to be seen how the new guides will affect NAD—will they prevent advertisers from making such claims in testimonials?

Paul Rand, Zócalo Group, President-Elect, Word of Mouth Marketing Ass’n

Marketers really want best practices for marketers and bloggers. Goal: clear and conspicuous disclosure, “above the fold.” Language must be unambiguous to the targeted consumer.

Marketer responsibilities: educate bloggers on their responsibilities; educate internal corporate audiences to create a culture of compliance; require disclosure from bloggers: “If you choose to review or share this product please be sure to disclose that it was provided to you by the company.” Monitor: remind those who “forget” to disclose; determine a cutoff policy for those who do not comply.

Editorial blogs: make it part of the editorial copy: “I received [] from [] to review this.” Also: a “disclosures and relationships” section on the website for bloggers who do this type of thing. Video sharing sites: relatively straightforward—recommend disclosure as part of the video content, ideally both in dialogue and in video description but at least one. Photo sharing: likely has to be part of the photo description. “I received [X product or service] from [company X] to create this” or “I was paid by [company X] to create this.”

Social media: as part of photo/video description; as part of status update; “disclosures and relationships” section on profile. Similarly, with review sites, disclosure should be part of editorial copy and should also create “disclosures and relationships” section on profile or website.

Twitter: hashtag within tweet, #spon or #paid, plus create a link to “disclosures and relationships” section on profile. (Comment: I wasn’t clear whether this link should appear in the tweet, but I guess not?)

Q: exemption for traditional media like newspapers?

Ferguson: No exemption per se. If audience can tell there’s a relationship, disclosure may not be as necessary. Restaurant critic/book reviewer who’s well-known: audience already knows that person has those relationships; personal websites/blogs make disclosure more of an issue.

Q: What if they aren’t well known? What if they are getting a commission?

Ferguson: it’s not that the reviewer has to be well-known, but that they have to be known as a reviewer, who can be expected to be getting stuff for free. They should have disclosure policies too, but we’re concerned with where it’s not obvious what the status is.

Q: What about sites that allow you to review the product on the advertiser’s site? Consumer buys product and writes: this is the greatest ever, it cured my skin disorder. Is the advertiser who puts up the site responsible for the content?

Ferguson: Not entirely resolved. If it’s a statement on behalf of the company, the company would be responsible. But if the consumer is making her statement on her own, but it’s on the company’s site, that’s a gray area. The CDA would exempt the person who owns the website from responsibility for content on the site. But if the advertiser knows the representation isn’t substantiated, the advertiser should be wary of keeping the statement on the site.

Q: question when the claim involves qualitative results—“helped my skin”—how do you figure out what substantiation is?

Levine: Issue is mismatch between testing and claims. Visual testing where people observed a difference would work.

Q: but typicality—what disclaimer would you use for what an average person would expect when it comes to a qualitative claim?

Levine: presumably you have some support—was the test a visual test where X number of people evaluated their skin, or scientists evaluated their skin? Were pictures taken? All those things would factor in.

Q: in the past you wouldn’t have needed to substantiate qualitative claims to show typicality—you wouldn’t have needed to know what the generally expected results were because you could just say “results not typical.”

Rosenfeld: you need to do testing; if you can’t, then you need to make claims that go to subjective views, not performance/efficacy claims.

Levine: that’s no different from how we’ve always handled claims.

Ferguson: Agrees.

Q: we market to our own members who pay for membership, not to the general public; we don’t pay our members to endorse our stuff but we do use their quotes in marketing our services/those of our advertisers. What do I need to think about?

Ferguson: Do members understand the relationship?

A: One member may use a product from another member and give a testimonial.

Ferguson: if there is an understanding of the practice that everyone is receiving a product to try and giving a review, then that should be clear, but a disclosure can’t hurt.

Q: On disclosing the sponsorship of studies: do you have to disclose even if you don’t say who ran the study at all? That is, even if you don’t use a name that might suggest that it was run by an independent lab, do you still have to disclose you paid for it?

Ferguson: yes, she believes that’s the rule. FTC is coming out with FAQs on these issues that should help.

Q: Flabbergasted by answer about consumers who post a review on the company’s own website. In the QVC case under the old guides, the FTC pushed the view that an unsolicited call to a live TV show can make the advertiser responsible; why would it be different if the consumer posted on the company’s website?

Ferguson: we’ve been grappling with this internally. You don’t want to mislead consumers or give the appearance that the company endorses what the consumer says. The company can control what’s on the website, more than it can control who calls in. An issue for the FAQ.

Q: on monitoring. How long do we need to monitor?

Ferguson: we don’t have concrete guidelines on that. If you have in place a policy that checks in 3-6 months after the product, that would go a long way towards showing the company is being proactive.

Q: Some products have a much shorter lifecycle than others—policing burden might differ.

Ferguson: that could be a factor to consider.

I had to leave for class at that point, but it was a useful discussion.